Not Just Conservative Libertarians

Rand Paul's filibuster may have uncovered an issue that resonates with more than his core conservative base. It's the overweening reach of the executive branch, especially the President's use of drones, and his claim that he has the power to kill citizens if he determines--without proof--they are "enemy combatants" involved in terrorism against the US. This is a real danger: any President unchecked could become like a King or dictator, with no limits to his power.

Paul's protest is consistent with the conservative-libertarian view that government must be limited. Progressives, like Democratic Senator, Ron Wyden, who supported Paul's filibuster, could make common cause on the issue of war powers, but not on the government's role in the domestic economy.

Conservatives and progressives might collaborate on cutting back the overreach of imperial powers, and ultimately, on reducing, or withdrawing support from the United States as empire.

Back in the Interwar Period, this impulse was first labeled isolationism; then it was short-sighted. The rising powers of Togo's Japan, and Hitler's Germany had to be stopped: they were determined to dominate everyone. Their hegemony could have created a terrifying world. The dominance of the US after WWII was relatively benign in comparison.

However, US super-power status has been fraying for years, and although the US is still by far the most powerful militarily, and largest economically, trends are against its maintaining preeminence for long. First of all, as Vietnam and then Iraq and Afghanistan demonstrated, military might is limited: it cannot impose American control over an unruly world, despite the US spending more on its military than all other major powers combined. Often, our "adversaries" have been able, like a judo master, to use our strength against us.

In Vietnam, the Viet Cong gained a goodly proportion of its arms from a vibrant black market, because of the flood of weaponry sent by the US. In Afghanistan, we created our own enemies: the Taliban and al Qaeda, when intervening against the Soviet takeover. In Iraq, we destroyed a relatively stable dictatorship, a sometime ally (Saddam worked with the CIA until invading Kuwait). Instead, we created an unstable "democracy" naturally allied with Iran.

In addition to the limits to military power, there is America's relative economic decline, caused by the dramatic rise of the BRIC nations, especially China, and by our trade debt. The US will not have the largest economy for long, and will not be able to afford the luxury of its huge military establishment. This is especially true as the US Dollar's reserve status weakens and we have to pay our debts with dollars earned!

It's likely we're seeing the beginning of the decline of the American Empire. I hope we can manage it more benignly than did the Romans, Spanish, or Soviets. So, Rand Paul has a point.

Maybe we can become like Monty Python's post-imperial Britain. We could have more fun!

Iran Is Not Recalcitrant

Even if Iran were secretly trying to develop the bomb, they would be acquiring it for defense. To fear they would drop it on Israel is to think the Iranians are less rational than even the North Koreans. The most they could do is threaten their non-nuclear neighbors, but even that's unlikely, with the US threatening them if they try. Meanwhile, Israel has several hundred bombs and the missiles and bombers to deliver them.

Even if the Iranians built the bomb, it would be for defense: to prevent the US from trying to force "regime change."

But it's pretty much agreed, by the world's best intelligence agencies, the American and Israeli, that Iran abandoned nuclear weapon development in 2004, and hasn't decided whether to resume it. On the other hand, many analysts believe that Iran has the technological and knowledge capability to build a nuclear weapon, and one of the policy points of contention was that very word, 'capability.' If Iran is to be denied nuclear 'capability,' then there are already grounds for attacking it--and scores of other countries.

What is almost never admitted is this: Iran, as a member of the IAEA, has the international treaty right to enrich uranium for peaceful purposes, as long as it allows inspections to insure that's what it's doing. Enriching uranium to 20% is for medical use, and as someone with prostate cancer treated by radiation, I believe modern nations should be able to supply their own, and Iran is modernizing.

It is possible that a gold bug's theory, explains why the US is acting this way. Iran has been leading an international movement away from the US dollar as the world's reserve currency. If the movement prevails (it will, eventually, even without Iran), the US would owe debt it couldn't pay, and its strength would be checkmated, because it couldn't credibly borrow the huge sums we now depend on monthly, especially to finance our imperial military.

So, the pressure against Iran may not be what it seems. The conflict isn't really about a few nuclear bombs that do not exist. It's about whether the US remains a viable economic superpower.

It is clear that Iran's leaders don't like us, but then we've been helping Israel and the MEK covertly attack the regime for years. Iran's promotion of a post-dollar international economy fits in with their hostility--and with their experience of the US as a malign international entity, consistently hostile--even when the Iranian regime was more liberal, and inclined to view reconciliation favorably.

Iran is 3.7 times larger than Iraq territorially, is 2.3 times larger in population, and has an effective government not based on one dictator. If bluff and sanctions don't work, war with Iran could be the straw that broke the American camel's back: it could bankrupt the US empire; we'd be facing a replay of Rome's fall in 476.

Dollar Collapse!

It hasn't happened yet, but financial gurus are predicting the dollar will collapse, and "your American lifestyle" with it--unless you follow their prescriptions.

These gurus are describing a real problem: US indebtedness to the rest of the world. But the Fed didn't cause this, and it's not because The Government spends too much money; it's because we all do--abroad.

"Free Trade" agreements have advantaged American corporations. They have been able to export their manufacturing and services to lower wage, lower tax countries with lax or no regulations. They've driven American wages down and unions out, because American workers can only compete by earning less: wages have stagnated since the 1970's, while corporations have earned higher and higher profits. Furthermore, everyone buys imported goods and services, even when a product claims "made in America." Most have a huge amount of imported components, even if assembled here.

So, what can workers do? Until the bust, they adapted by working two plus jobs, depending on other family members working, and when these strategies weren't enough, they borrowed from their homes. Wall Street was awash in cash, encouraging wilder and wilder speculation--before the collapse, and after. That's why so much of the economy migrated to the financial sector; workers were providing it money through debts, and corporations were providing it money through overseas profits going to the 1%, who "earn" too much money to spend; so, they "invest" it.

Free trade means freedom for corporations, not freedom for workers, and it means importing nearly everything. So, how do we pay for the goods and services we no longer produce? We borrow through fiat dollars, which have, greatly depreciated since Nixon closed the "gold window" in 1971. Gold sold for between $1,726 and $1,743 on 11/2/11; but its price was set by the US until 1971 at a guaranteed $35 per ounce. Money supply has increased 13-fold since 1971.

Fiat money is designed to inflate a little bit each year: the Fed's target is about 2%. Moderate inflation stimulates the economy; deflation would accelerate depression.

But the real problem is: we are paying dollars created by the Fed, for goods and services abroad, while not selling enough to earn the Euros/Yen/Yuan, etc. to pay for those dollars. The "Free Trade" agreements, and policies encouraging corporations to export jobs and import goods have created the huge trade debt.

The trade debt causes government budget deficits, especially when the only people enriched by "free trade" (our Roman Senators) don't pay enough taxes, while everyone else is impoverished by it and needs help: "bread and circuses."

The dollar and the economy would regain strength, if Americans stimulated domestic production, creating jobs, got off imported oil and penalized corporations exporting jobs/production. It appears, however, that the "one-percent," like the Senators of the late Roman Empire, don't want to allow such reforms.

Perhaps the OWS movement can force their hand.

Money Trumps Empire

"We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act." On Page 4 of the official Standard & Poor's "Research Update."



Republican obstructionism on behalf of their constituency, the wealthy and selfish (cf. the Selfish Class on this site), has done what the debt-ceiling agreement narrowly averted: brought into question the financial credibility of the US Government.

This is a big deal. Whether S&P used questionable measurements, whether it acted out of its own political agenda, it still did what no one had done since the US dollar became the reserve currency of the world. A credit downgrade from AAA to AA+, unless it is quickly reversed (unlikely), will lead, first of all, to higher borrowing costs for all of us.

Take that, barely whimpering economy!

But the decision will also hasten the day when the dollar will no longer be The reserve currency. That's an even bigger deal. It could mean the beginning of the end of the American Empire, because how can the US pay for its bloated military in 120+ countries, when borrowing costs really begin to rise? It can no longer just continue to borrow and expect the rest of the world to lend to us at rock bottom rates. Of course, the US can continue to borrow, and to inflate the value of the dollar, since it still owns its own printing press (the Treasury), and supposedly controls its own reserve bank (the Fed).

But then the US would be acting like any banana republic, except that US debt far exceeds the debt of any other country, or combination of them. There is no one who could bail us out, and most economies--including the US, of course--would be driven into such a Depression that the 1930's would look like an early rehearsal.

The world economy would have good reason to collapse. If it doesn't do so, then political leaders will have finally come together to save our civilization, but, on the evidence of the last 12 years, cooperation is not a great bet.

America's fall may come a lot faster than Rome's.

Rome had terrible credit and was continually diluting (inflating) its currency. But during Rome's long expansion it was also robbing the wealth of the peoples it conquered; it paid off its debts with the proceeds: gold, other treasures, and most of all, slaves. In the US, the considerable profits of empire are pocketed not by the US government, but by private, effectively stateless, global corporations. Maybe that's why they pay so little in US taxes, even with billions in profits--profits are earned abroad. Corporations avoid declaring profits in those nations, also. It's easy to find an island/city-state with nearly zero taxes.

Deficit-mongering Endangers Dollar

If you scream about the deficit, but then don't do anything about it, or pass tax cuts that increase it, you actually endanger the nation more than the deficit, itself. The Republicans are forcing this to happen. They are shortening the time before the world's nations will jettison the US Dollar as the world's reserve currency, because US fiscal policy will lose credibility even faster, while the nation will be mired in non-recovery. However, the dollar is likely to lose its special status, anyway, sooner more likely than later.

What matters is not the government deficit, but the trade deficit: the two are not necessarily related. Deficit spending that enhances US jobs, productivity and creativity would actually cut the trade deficit and delay a move away from the dollar. Deficit spending that simply increases our national debt, like the tax cut for the wealthy, will bring us closer to the time when the US Dollar becomes just another currency; it increases our trade deficit and makes the US poorer.

The dollar losing international reserve status will be a very big deal. It will be a disaster for the US, unless the way has been carefully prepared. What's the likelihood of that?

This is what will happen: the US can no longer so freely borrow on international markets: the Fed can't blithely create money as it is doing now with Quantitative Easing. The bigger problem would be: how do we repay (by far) the largest trade deficit in the world? We won't be able to just print dollars for payment. We'll have to earn Renminbi, or Marks or Rials to buy from those places.

Imports will cost much more. Three-dollar gas will be a faint memory: prices would be comparable to Europe's ($5-7 per gallon now), or much higher.

We also won't be able to continue our military mission to control every corner of the globe. That, to me, would be a positive outcome, both for the US and the world. Who would lend to us at the low interest our bonds now pay? Interest costs to maintain our military could bankrupt us, something that happened not only to the Romans, but also led to the overthrow of the Bourbons, ushering in the French Revolution.

Any dollar-denominated asset would be worth much less outside the US. Americans would have to produce more, at lower cost--through subsistence wages, perhaps, or greater efficiency, or probably both--and import less.

Perhaps, an increasingly impoverished majority would demand Equality, as rebelling masses did on the streets of Paris, but it might come too late. The billionaires may have decamped, with their tons of gold (not dollars), just like Tunisia's Ben Ali!

Loss of reserve status could end the American empire. While temporarily poorer, Americans could end up freer and better off--if they throw out the corporate octopus impoverishing us all.

Politics, Economy: Does Anything Work?

The bank bailout and stimulus package worked--up to a point. While the former did rescue the banks, and the latter spared us the depths of the Great Depression, neither has "fixed" the economy.

The big banks made money, but mostly on speculation with the cheap (almost free) bailout money, but they haven't been lending enough to genuinely rescue the economy. In fact, there is a real danger that bank speculation could trigger a worse financial collapse, unless Congress passes laws empowering government to regulate the whole financial industry. Because of widespread American distrust of government, however, and because of intense bank lobbying, re-regulation of the finance industry is difficult to get through Congress (banks were much more regulated before the wave of deregulation that began with Carter and Reagan, and continued through Clinton and Bush administrations).

Further, the stimulus was too little. While some millions of jobs were saved, and something less than that were created, the number of jobs lost, and the number of jobs needed is far larger, so the stimulus limited the damage, but didn't go far enough. The stimulus also saved the housing market from collapse: it is slowly recovering, but many are still losing their homes to foreclosure, many of those due to job losses, many others because house values plummeted and mortgage holders were left "underwater," owing more than their houses were worth.

No wonder people are unhappy and grasp for "solutions," like the Tea Party movement. Ironically, the solutions offered: abolishing the Fed, going back to the gold standard, free marketeering, abolishing regulations already in place, would make things worse.

The gold standard would drastically reduce the money supply, which would destroy more jobs; further deregulation would permit more speculation by the banks, which may be why the tea party is so well-funded, but it would further reduce the money available for job creation. And budget-balancing would subtract still more.

The real problem (Dollars and Sense: May-June, 2010), is that the whole global trading and financial system is seriously out of whack: the dollar no longer works as the world's reserve currency, which requires the US as importer of last resort, a high dollar, imports of goods, exports of dollars and the destruction of US manufacturing. This creates huge trade deficits, consumer debt, high finance and high unemployment.

What is needed: regulate finance and reduce its importance, revive manufacturing (especially to combat climate change), an active government in the economy, a low dollar, not a high one, and a new international reserve unit to replace the dollar.

This might end America's imperial hegemony, but we've already gotten to the point where we can't afford it; it has destroyed the US economy. The jobs we most succeed in creating, wreak destruction world-wide. We'd be much better off as "just another country." Otherwise, we might end like the Assyrian Empire: brilliant, brutal and short.